Wednesday, September 17, 2008

We'll post a little more tonight, from the Amended Consolidated ENHANCE Securities Fraud Complaint -- at pages 83 to 84 -- note that "CW" refers to "confidential witnesses" -- and the number following the "CW" refers to individual confidential witnesses. CW 1, for example, avers s/he knows Carrie Cox knew there would be "no good news from ENHANCE." That was in the summer of 2006. Let's look in, now:

. . . .211. Based on interviews with former Schering employees conducted by counsel for Lead Plaintiffs, Exchange Act Defendants Hassan and Cox were closely involved with ENHANCE and regularly briefed on its details. As discussed above, CW 1 interacted with Schering’s Brand Team on a daily basis regarding ZETIA and VYTORIN, and updates regarding ENHANCE were shared in quarterly Brand Review Meetings that CW 1 attended, which were conducted by Defendant Cox. According to CW 1, there was a quality control assessment of ENHANCE data done in late 2005 to early 2006, and by the Summer of 2006, CW 1’s team “knew that they were not going to get any good news from” ENHANCE.

212. CW 1’s statements are corroborated by CW 3. According to CW 3, throughout the Class Period, Cox attended a monthly meeting with the cholesterol franchise Brand Team and the individuals in charge of ENHANCE, Drs. Veltri and Strony. CW 3 was personally involved in the preparation of certain materials for these meetings. According to CW 3, the Company’s other senior executives, including Hassan, also attended certain of these meetings. According to CW 3, ENHANCE, its progress, and results, were regularly discussed by Drs. Veltri and Strony with Cox and the other senior executives in attendance. At the meetings, discussions and detailed PowerPoint presentations updated the participants on developments with VYTORIN and ZETIA, involving not only the marketing and commercial aspects of the drugs, but also the status of ongoing research. As CW 3 has stated: “Nobody keeps this kind of stuff from management when it is going to have a huge impact on the product.” When CW 3 asked Drs. Veltri and Strony how ENHANCE was going, “years ago,” “they always seemed a bit worried.” They told CW 3 that “they did not like the kind of results they were seeing and that they had to take another look at something.”

213. According to CW 3, Schering’s marketing department for the drugs, headed by Ray Russo, “wanted to control the science; it was very much marketing driven and not science driven,” and Schering is “not concerned with the data as much as they are selling the drug”. . . .[Emphasis supplied.]

Again -- we do know Carrie Cox exercised and sold on the twentieth day of April, 2007 and first day of May 2007 -- netting something like $11 million, on a series of transactions which grossed around $29 million.

6 comments:

Anonymous
said...

Condor,

The prices she sold at are near the market peak prices. Her transactions occurred immediately at the end of a 40% run up in price that began on March 16th stopped rising when she sold. After she sold the price then plateaued with some variation until October 19th (when they announce that they bought Organon) and has been dropping every since.

Could you elaborate possible reasons for on the sudden rise in stock price prior to her sales. I believe that in the spring around that time they did mention that they were looking into Organon.

What is certain to have influenced the stock price during the run-up is that Vytorin scripts were rising by more than 25 percent per quarter -- and the cholesterol franchise represented perhaps as much as 75 percent of Schering's total profits at that time -- in short, it was a license to print money.

Thank you for looking into it. I'd be interested to know if there were any announcements either from Schering or analysts during that 6 week run up that indicated that or if that information about Vytorin sales was known publicly prior to the runup.

Salmon -- to continue the dialogue while I organize my thoughts on the topic, here (for a longer post, tonight), I will point out that you were right -- Schering DID announce the Organon deal on March 12, 2007 -- and that caused an uptick in Schering common stock prices.

Perhaps more significantly, though, on April 19, 2007 -- one day before Carrie Cox began liquidating her stock options, via exercises and sales -- Schering announced First Quarter 2007 results, and the headline was the explosive 48 percent growth in sales of Vytorin -- over Q1 2006:

". . . .Global cholesterol joint venture net sales, which include VYTORIN and ZETIA, totaled $1.2 billion in the 2007 first quarter, a 48 percent increase compared to net sales of $778 million in the comparable 2006 period. Schering-Plough does not record sales of its cholesterol joint venture with Merck as the venture is accounted for under the equity method. Including an adjustment of an assumed 50 percent of the global cholesterol joint venture net sales, Schering-Plough's adjusted sales for the 2007 first quarter would have been $3.6 billion, a 21 percent increase, compared to $2.9 billion on a similar adjusted basis in the 2006 first quarter. . . ."

Now, it is good practice to wait until results are announced before an insider sells, but the argument here is that she knew there was MUCH MORE to disclose -- and she knew CEO Hassan hadn't disclosed it.

The "it" was the likely failure of Vytorin's "proving" post-market trial -- ENHANCE.

SP's supposed robust phase III development compounds that we've heard makes them in a much better position than the rest of Pharma with respect to replacements of lost sales is due to purchasing Organon and its pipeline.

The timing of the announcement of this purchase before the runup may indicate that they were already concerned about the potential loss of Vytorin sales and needed something to replace it with. I seem to remember Fred bragging that they did the deal is something like 12 days. Not a lot of time to do due diligence on the pipeline especially since Pfizer had just recently announced that they were backing out of a comarketing agreement to for the #1drug in the bunch, and considering Suggamadex got a thumbs down.

In fact I'm still waiting to see what the FDA and SP says about that #1 compound. It's been almost a year since it was submitted according to SP's press announcements and the review clock is only 10 months. If SP withdraws the compound from review they don't have to say anything at all.

Asenapine is the compound. It is in a disolvable tablet at BD dose. it is off patent, thus if a clever generics firm can copy it with a different mechanism then its all over. however Pfizer pulling out is indicative that asenapine is a dud compound. What pt with schizophrenia is going to want to take a fizzy tblet twice a day ?Also the data is dodgy, i failed study against Zyprexa, 1 negative study and one +ve . They'll try and push it for Bi polar as the data is better.SP purchased Organon so they themselves would not be bought out.I feel sorry for theemployees who have to put up with the tag "earning trust" what a joke !

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